In this months ACTU Super Newsletter for May/June 2004: Master trusts fight to keep place in the sun; Union Super power; Limited win in SG for all campaign; Combet talks infrastructure; CFMEU wins Super boost; Unions fight surcharge; Concerns with safety guidelines; Union view wins support at Safeway; US paranoia about unions; From the UKs TUC and long-term investing.
ACTU Superannuation Trustees Network Newsletter No.24
May/June 2004
Editor: Linda Rubinstein
Fax: 03 96634051
Email:
lindaru@actu.asn.au
Master Trusts Fight To Keep Place In The Sun
Unions were amazed when IFSA (Insurance and Financial Services Association)
turned up at an Industrial Relations Commission hearing of applications to make
a number of federal awards apply on a common rule basis in Victoria. The
Kennett government abolished Victorian awards in 1993.
Now the law has
been changed to allow for federal awards to apply, extending entitlements to
penalty rates, overtime pay and annual leave loading to the one third of workers
in the state who do not currently have them.
IFSA came to the hearing
representing the banks and insurance companies which are the major providers of
master trusts, including AXA, AMP and Westpac.
The master trusts are
opposing the spread of federal award superannuation provisions which generally
require contributions to be made to industry funds.
IFSA will be asking
the Commission to exempt the superannuation clauses from the common rule
application on the grounds that it would be harmful to their members’
businesses if super contributions shifted to award-specified
funds.
Industry Funds Forum is also appearing in the case, and is likely
to argue that industry funds, with their lower fees and charges, are in the
interests of employees.
Unions want Victorian workers to be able to have
their super in not-for-profit industry funds which produce significantly better
returns than their private rivals and will not agree to have super left out of
awards.
Unions are also asking why companies whose funds management
businesses seek investment mandates from industry funds feel they can interfere
in industrial proceedings in defence of their master trusts.
It is
expected that some funds will raise this issue with their funds managers.
Discussions between the parties and conciliation in the Commission is
continuing.
Union Super Power
Conference advance notice
The ACTU is holding a one day
conference and strategy workshop designed for union officers to assist in
developing campaigning and bargaining around superannuation.
The
conference will be held in Sydney on Thursday 2 September and repeated in
Melbourne on Friday 3 September.
Issues to be covered by the conference
include:
Detailed information,
including venue details and program will be sent out when available.
Limited Win In “SG For All” Campaign
First the good news: the Treasurer has announced that the government will
remove the exemption for pre-1991 earnings bases for calculation of
SG.
The effect of the exemption is that many thousands of workers, mainly
coal miners, Qld nurses and some corporate fund members (such as Ramset
Fasteners in Victoria, which does not pay super on shift penalties) do not
receive the SG on their full ordinary time earnings, costing them thousands of
dollars in super.
Now the bad news: unions have campaigned for ending
the exemption for years, and all political parties on the Senate Super Committee
recommended the change in 1996.
In spite of this, Mr Costello announced
that the exemption would remain until 1 July 2010 – a very long wait for workers
who have been missing out for years already, and a huge windfall for employers
who have been able to avoid paying the whole SG.
ACTU president Sharan
Burrow and CFMEU (Mining) president Tony Maher have met with the Assistant
Treasurer, Senator Helen Coonan, to press for immediate removal of the
exemption.
They also met with ALP superannuation spokesperson Nick Sherry
to urge Labor to agree to legislate immediately should it win government.
Combet Talks Infrastructure
from speech to ASFA 9 March 2004
Another crucial area related
to super requiring attention by Government is encouragement of investment in the
nation’s infrastructure.
It is widely recognised that alternative
assets have contributed to fund returns. Recently a number of industry funds
decided to invest in a social infrastructure fund, comprising the Spencer St
railway station in Melbourne, and a number of schools and a water treatment
plant in NSW. You may have heard that this decision created a bit of heartburn
in the union movement, understandably given our long standing concerns abut
privatisation and PPPs.
That’s not surprising, given the history of
this kind of project in reducing employment and employment conditions, as well
as the quality and extent of services to the community.
We also want to
see governments get value for money – which is questionable in some PPPs,
where costs can be higher and governments left with the risk, as with
electricity in WA and transport in Victoria.
The refusal of governments
to borrow capital, even though it has been clearly demonstrated, most recently
by the Allen Consulting Group, as being the most efficient capital raising
mechanism, highlights the need for a more active debate about infrastructure
development – a more coherent look at the role of public and private
investment.
In particular, with Government debt at very low levels, I
can’t see why a market for bonds which finance infrastructure cannot be
considered.
Having said that, and stressed that the ACTU would prefer to
see infrastructure financed through debt capital raising by governments, I
don’t believe that this means that super funds should turn their backs on
equity finance of public infrastructure, as through the DAF/ABN AMRO fund.
As a STA trustee, I look forward to when we will be able to invest in
public housing, important not only to assist those in need, but also, by adding
to supply, assisting in reining back galloping prices.
However, I would
hope that the funds will find ways of investing in the future that will address
the concerns I have outlined, and ensure best value for taxpayers as well as
reasonable returns for fund members.
The anticipated consolidation of IFS
and Members Equity could be an opportunity for direct investment, whether
through underwriting funds’ purchase of government bonds or by originating
debt and equity financing of PPPs at lower cost to governments than is currently
available.
CFMEU Wins Super Boost
More than 600 collective agreements covering Qld building workers have
provision for increasing super contributions to 15% by July 2005.
The
agreements require employers to pay $97 per week from 2003, rising to $125 by
2005, with employees contributing $9 per week in 2003, $18 in 2004 and $27 in
2005.
Unions Fight Surcharge
Unions with members affected by the superannuation surcharge are fighting
back.
Airline pilots, aircraft engineers, flight attendants, doctors
and maritime officers founded the Society of Superannuants (SOS) in 2001 to
lobby against the unfair operation of the 15% surcharge for members of defined
benefit funds.
SOS says that in the private sector the tax can exceed
15%, and that members of different ages, but with an identical adjusted taxable
income, can pay different amounts of surcharge tax.
In addition, based
purely on gender, women can pay more than men.
SOS is assisting a legal
challenge to the surcharge based, in part, on a claim that surcharge tax returns
calculated using collective fund based averaging assumptions are excessive
because they do not take into account the individuals’ personal
circumstances.
SOS has been heartened by a recent decision of the
Superannuation Complaints Tribunal that a fund member’s surcharge had not
been calculated in accordance with the legislation and must be
redone.
The decision has huge cost implications for all defined benefit
funds, and SOS is confident that it will lead to abolition of the
surcharge.
While not opposing the surcharge in principle, because it is
directed towards high income earners, the ACTU has argued for a fairer
collection method.
Concerns With Safety Guidelines
The ACTU is still concerned that the new licensing regime for super funds,
will operate unfairly for not-for-profit funds.
Although the legislation
does not require trustee companies to meet capital adequacy requirements (which
would impose a heavy burden on sponsoring unions and employer organisations) it
appears from the APRA guidelines that sponsors might have to come up with
several million dollars for the trustee company to hold.
It is clearly
absurd to expect these organisations to come up with this kind of money,
particularly as there is no evidence that this would assist in minimising any
kind of risk for members of funds which often have assets of several billion
dollars.
Union View Wins Support At Safeway
from AAP 6 May 2004
Attempts to dismiss concerns about
corporate governance at Safeway Inc in the US failed when two influential
advisory firms recommended that CEO and board chair Steve Burd be removed from
the board, although not necessarily from his job.
The advisers cite
Safeway’s poor performance and board cronyism resulting in lack of
oversight of management as reasons for the decision, which includes
recommendations to vote against re-election of a number of directors.
The
company is reported to have tried to head off the revolt by offering to bring in
new independent directors.
Unions welcomed the campaign for change
although a three and a half month strike of workers from the Southern California
grocery division has been settled.
US Paranoia About Unions
from Financial Times 4 May 2004
The fur is
flying over a proposal by the US Securities and Exchange Commission to allow
shareholders to nominate company directors on the management’s slate.
The plan, on which the SEC will decide soon, has become the most
controversial it has ever proposed.
It is almost unanimously supported
by labour and state pension funds and unanimously opposed by business
groups.
The Business Roundtable is quick to point out that the proposal
originated with the American State, County and Municipal Employees’ Association,
a union body that has used its small $600m pension fund to put forward two dozen
shareholder proposals in the past year.
Business groups believe that the
rule might become a Trojan horse for funds to force labour-friendly candidates
on to company boards.
Mr Castellani said: “This will provide an
opportunity for special interest groups such as unions to hijack corporate
agendas. [The funds are] wrapping themselves in the cloak of good corporate
governance to gain power and influence. They will come out after a while with
their real demands.”
Alan Hevesi, the head of New York state’s pension
fund, disputes the theory. He said recently: “We want these companies to
succeed, we want them to perform, we want them to make money. We are capitalists
in the ultimate sense of the word, the American sense of the word.”
Rich
Ferlauto, AFSCME pension investment policy director, said: “We want more
shareholder-friendly directors, whether they are labour-friendly or
not.
“State pension funds lost 15 per cent of their assets in the past
few years, with companies like Enron and WorldCom. It’s no wonder they are
paying more attention to their investments.”
From The UK’s TUC
A recent email alerted us to some interesting material about long-term
investing.
The UK’s activist Universities
Superannuation Scheme ran a competition with investment consultants Hewitt
Bacon & Woodrow last year asking fund managers and other interested parties
to come up with ideas for longer-term mandates. You can find lots of information
on the competition entries on the USS website.
Having
Their Cake: How the City and Big Bosses are Consuming UK Business is a
critique of the relationship between the capital markets and British businesses.
